Ryan Co purchased a computer for $15 000. Originally it had an estimated useful life of 4 years and a residual value of $3000, but on the first day of the 4th year of life the estimated useful life was extended by a further two years and the residual value was reduced to zero. Ryan Co uses the straight-line method to depreciate its computer equipment. At the end of year 4, how much depreciation should be recorded for the computer?

Question

Quizplus · Accepted Answer

Initially, the annual depreciation was ($15,000 - $3,000) / 4 = $3,000. After 3 years, $9,000 is depreciated, leaving a book value of $6,000. With 3 years remaining (2 extended years + 1 year), the new annual depreciation is $6,000 / 3 = $2,000.

Ryan Co Purchased a Computer for $15 000